The Auto Industry Bailouts: Obama, Financial Crisis and Car Sales in the United States (2009-2010)



Beginning in the latter half of 2008, a global-scale recession adversely affected the economy of the United States. A combination of several years of declining automobile sales and scarce availability of credit led to a more widespread crisis in the United States auto industry in 2008 and 2009.

Following dramatic drops in automobile sales throughout 2008, each of the “Big Three” U.S. automakers — General Motors (GM), Ford Motor Company, and Chrysler — requested emergency loans in order to address impending cash shortages. By April 2009, the situation had worsened such that both GM and Chrysler were faced with imminent bankruptcy and liquidation. With the intent to prevent massive job losses and destabilizing damage to the entire manufacturing sector, the U.S. and Canadian governments provided unprecedented financial bailout ($85 billion) support to allow the companies to restructure and jettison legacy debt via Chapter 11 bankruptcy. Both companies separately filed for this protection by June 1.

General Motors emerged from bankruptcy as a new company majority owned by the United States Treasury, and Chrysler emerged owned primarily by the United Auto Workers union and by Italian automaker Fiat S.p.A.. Both companies terminated agreements with hundreds of their dealerships and GM discontinued several of its brands as part of bankruptcy proceedings. Ford Motor Company was able to survive without entering bankruptcy partly due to a large line of credit which it obtained in 2007.

The U.S. automakers were more heavily affected by the crisis than their foreign counterparts, such as Toyota. Following the 2000s energy crisis, the U.S. automakers failed to produce more fuel-efficient vehicles as opposed to the high-profit sport utility vehicles that were popular in the late 1990s and early 2000s which led to excess inventory and undesirable product. Since the automotive crisis abated, all three American automakers have increased sales of vehicles and have posted a profit.

As of 2012, the industry has recovered to some extent. GM had 2011 sales of more than 9 million vehicles, more than Toyota. According to a May 2011 report by the White House National Economic Council, however, the US government may have to write off about $14 billion of its $80 billion loan.

By 2012, polls from Pew Research Center and Quinnipiac University Polling Institute show that the American public now believes that the bailouts have been helpful for the American economy.

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